EU Governments OK Lower Roaming Fees

Consumers claimed a victory Thursday as EU governments agreed to cut the cost of using mobile phones abroad, paving the way for a cap on roaming fees to be introduced later this summer.

EU travelers could first notice a difference when they slip over a border in August _ their phone will beep, telling them how much a call home will cost. And when they return, they could see their phone bill cut by up to 70 percent compared to the last time they phoned friends or family from the beach.

Lawmakers and governments fast-tracked the new rules in a record 10 months despite heavy lobbying from telecom companies worried about losing profits _ even though lower rates may also encourage more people to call more often.

The prospect of pleasing voters won over 14 EU nations that had opposed the law last December. All 27 voted for it on Thursday.

"This is a great day for consumers and businesses," said EU Telecom Commissioner Viviane Reding, the driving force behind the change. She has accused telecom companies of ripping off customers by charging unjustified and extortionate prices.

But the telecom industry reacted with dismay, saying retail price regulation had no place in a free-market society. It has warned that lower roaming revenues could hurt future investment and force companies to raise fees in other sectors, such as for domestic calls.

"We're talking about a precedent. Regulating retail prices in this way is not what free market is about," said David Pringle, spokesman for the GSM Association of Europe's mobile phone operators. "It creates uncertainty for investors because they don't know where the Commission will strike next. This is going to have a big, long-term impact."

But Ovum telecom analyst Matthew Howett said companies had softened the blow by arguing for a clause that gives customers two months to opt for the new cap. And they may eventually gain as more people feel more free to use their phones abroad.

"Your holidaymaker is very conscious of the fact that it costs money. Businesses are the main users," he said.

The EU has hinted that it might allow operators use lower-spectrum frequencies, cutting their costs since a mast would cover a larger area.

"That would go some way to making up for the revenues that would be lost," he said.

The Commission and national regulators said they would carefully watch how call providers react to the changes.

"I know that some in the industry have been saying that domestic prices may rise now to compensate operators. I find this very hard to believe because competition between mobile operators is fierce," Reding said. "Raising domestic prices means kicking yourself out of the market."

The new rules only cover voice calls but the Commission warned that it was also keeping an eye on roaming fees for text messages or Internet services like BlackBerry devices. Vodafone Group PLC has already announced a flat fee for data roaming from July 1, although this only applies within certain conditions.

The roaming cap is scheduled to take effect June 30. Telecom companies will have one month after that to offer customers a new pricing structure with considerably cheaper roaming fees.

Mobile phone users will have another two months to choose whether they want to go with the new plans or stick with their existing contracts.

After that, they will be put on the new contract automatically.

Before the reform, a four-minute call from France across the border to Germany would cost a traveler $5.38 even though a similar call made within France over a much larger distance could cost just a few cents.

Under the new rules, the retail roaming cap will be set at 66 cents per minute for making a call when abroad and 33 cents per minute for receiving one, plus value-added tax.

The ceilings would drop further, to 58 cents for making calls abroad and 26 cents for receiving them, by 2009. The regulation will then lapse, unless the EU decides to extend it.

The industry now faces a "huge logistical exercise" to implement the new rules, Pringle said.

"In the timeframe they envisage, it will be difficult. A lot of people are going on holidays. ... Industry will have to grapple with it now," he said.

Mobile operators draw between 10 percent and 18 percent of their revenues from international roaming charges, according to research firm Evalueserve.